* This guy emailed me to say that my Mish article went awry at the crucial point: When the creditor lends out money so that borrowers can spend more, the creditor is content to carry lower cash balances, because he’s now holding a claim on future income. I had considered this at the time I wrote the article, but now I can’t remember how I resolved it. I’m not going to lie to you, I sorta thought Mish himself would blow me up in a response, so that we could move this debate forward. Anyway I might write a future post to tie up these loose ends, but like I said I wish a big gun pro-deflationist would spell out what’s wrong in my Mish critique.

* Today at Mises I criticize CNBC for dissing savings. I shower some love on Tyler Cowen near the end.

* Speaking of Tyler, what the @$@#$( is he talking about in this post? Seriously, did he and Scott Sumner decide to pull a prank and write a crazy post each? Here’s Tyler:

I don’t know the “inside scoop” on the bank books, but in purely theoretical terms a bit of chicanery may be socially optimal now. In general, bank moral hazard-induced-risk-taking may move closer to socially optimal, the closer banks are to insolvency. Let’s say that banks are generating high profits now by, one way or the other, pursuing short run profits and “going short” on market volatility. In the long run this investment strategy will bite them, sooner or later but probably later. In the meantime they likely will become solvent. If insolvency has a high fixed cost this can be a good risk, even from the taxpayer or social point of view.

In the comments of Tyler’s post, somebody already beat me to the punch of the gambling analogy. Really, wouldn’t it make more sense to say the exact opposite? Namely, that the very worst time in the world for banks to be engaging in high-risk bets (let alone when backed up by the taxpayers), is when they are on the verge of insolvency?

Tyler seems to be saying, “It’s not a bad idea to take a gamble that pays $1 million with 99% probability, but pays negative $1 billion with 1% probability, so long as you don’t play it very often.” I don’t think that’s right, and even if it were, the time to play it (a few times) would be when you were already up several billion dollars–not when that 1% outcome could ruin you.